16 February 2008
INCOME Tax search is a common and regular phenomenon. Every other day it is reported by the media. It becomes more headline-grabbing during the last leg of the fiscal when certain targets are to be realised. But can it be conducted even after the death of an assessee? Sounds strange! But this was precisely the issue which came up before the Tribunal. And what did the Tribunal do? The outcome was quite predictable - it simply dismissed the proceedings conducted in pursuance of a search warrant issued u/s 132 of the Act in the name of a dead person. But the Tribunal allowed the Revenue to pursue legal course against the legal heirs of the assessee as per legal provisions.
16 February 2008
Assessee (deceased) was a manager of a Co. called RMEC Project Ltd. A Search was conducted in the offices of the Co. during which some incriminating material was found against the assessee showing that the assessee had colluded with others to siphon off huge amounts of the project. However the assessee died thereafter but on the basis of this a warrant u/s 132 of the IT Act was issued against him and even a search was conducted despite the revenue authorities being fully aware of the assessee's death. In consequence of this search u/s 132, revenue proceeded to make assessment on the legal heirs of the assessee u/s 158-BC(c)/144 of the Act after duly serving notices on the legal heirs.
The order of assessment was appealed against by the Assessee before CIT(A) who held in favour of assessee and observed that the assessment made u/s 158-BC(c)/144 was invalid since the same was done in consequence of search conducted in the name of a dead person which was illegal and against the principles of natural justice. Therefore if the search was void then anything done in consequence thereof is also void.
16 February 2008
Aggrieved by the decision, Revenue went in appeal to the Tribunal which decided the matter finally.
The following grounds were taken by Revenue in appeal :
1. On the facts and in the circumstances of the case, the learned CIT(Appeals) has erred in law in cancelling the assessment made under sec. 158-BC(c) on the legal heirs of Sh. Mohar Singh (deceased) by ignoring the fact that search u/s.132 was duly carried out after executing the search warrants upon Smt. Kanta Devi and Shri Mahavir Singh, sister and brother in law of the assessee (deceased) respectively.
2. That the learned CIT(Appeals) has wrongly applied the ratio of judgment of Hon'ble Delhi High Court in the case of RC Jain through L.R. v. CIT and others, 190 CTR 34 as in the said case no notice was issued in the name of the legal heirs of deceased whereas in the present case notice u/s. 158 BC dated 20.05.2004 was issued in the name of legal hair of the assessee followed by another notice u/s. 142(1) dated 7.6.2004 issued in the name of Shri Rakesh Kumar Mukesh Kumar legal of the assessee and accordingly assessment order u/s. 158-BC(c) dated 30.7.2004 passed in the name of legal heir of the assessee (deceased) suffers from no legal or technical infirmity and deserves to be confirmed.
3. That the deceased Sh. Mohar Singh who as Manager of M/s. RMEC Project Ltd. had siphoned off huge funds by manipulating the accounts and preparing bogus bills and the assessment completed at Rs.70,10,060/- is based on incriminating documents found and seized during search u/s.132 containing the details of undisclosed income of the assessee.
4. That the order of the learned CIT(Appeals) is erroneous as it is violative and is against the provisions of sec. 159 of the Income Tax Act, 1961 which stipulates that any proceedings which could have been taken against the deceased if he had survived, may be taken against the legal representative and all the provisions of Income Tax Act shall apply accordingly.
Having heard the arguments the Tribunal observed that,
++ not only the search but also search warrants were illegal and void ab initio as they were issued in the name of a dead person and thus violative of principles of natural justice and provisions of law, and thus assessment made in consequence of such search is also illegal and liable to be quashed. However, though the action of Revenue was illegal in the present situation, it wasn't without a remedy and the authorities could proceed against the legal heirs of the assessee under appropriate provisions.
21 February 2008
THANKS ALL SPECIALLY TO CA DASHRATH MAHESWARY FOR UR KIND SUGGESTION. SIR IS THERE ANY ALREADY DECIEDE CASES THERE IN THIS REGARD? IF YES PLZ INFORM ME. THANK YOU GOUTAM HOTA
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